Signing of FTAs is a start. Their success will be judged by gains in global market, Pg11

Key Highlights:

• India has recently concluded major Free Trade Agreements (FTAs) with the EU, the UK, and Australia, marking a shift from a more inward-looking trade policy.
• These FTAs provide Indian exporters with zero-duty access to a $3.5 trillion market, encompassing the EU and the UK, which together account for about 30% of global imports of low-skill manufacturing products.
• India's export potential is estimated to be approximately $160 billion annually, which is currently untapped due to various challenges.
• The success of these FTAs hinges on addressing challenges related to standards compliance, regulatory complexity, access to competitive inputs, and maintaining policy stability.

Detailed Insights:

• India's competitors, such as Bangladesh and Vietnam, previously had preferential access to key markets, giving them a competitive edge due to lower or zero tariffs.
• These agreements signal policy stability, making long-term investment decisions more viable for companies seeking alternatives to China, thus re-opening China-plus-one strategies.
• Non-tariff measures, such as product-safety and environmental requirements, now affect 90% of world trade, posing compliance challenges, especially for developing countries.
• India's complex trade regime, exemplified by the UK FTA with its multiple categories and conditionalities, raises compliance costs and creates scope for discretion, damaging credibility.
• FTAs open export markets but do not ensure access to the best inputs and machines, which depends on the Most Favored Nation (MFN) tariff regime, where protectionism can raise economy-wide costs.
• There's a risk of undermining trade agreements through measures like anti-dumping duties and quality-control orders, which can restrict imports and harm downstream exporters.
• High input costs, particularly power and credit, remain a significant constraint, and competitiveness must be achievable and affordable for export discipline to work in India's favor.

Key Concepts Involved:

• Free Trade Agreement (FTA): An agreement between two or more countries to reduce or eliminate trade barriers such as tariffs and quotas.
• Most Favored Nation (MFN): A principle in international trade where countries agree to offer the same trade terms to all their trading partners.
• Non-Tariff Measures: Policy measures other than ordinary customs tariffs that can restrict international trade, such as quotas, technical standards, and regulations.